US Dollar Bull Run, Lobbying Spending, US Debt-to-GDP, US Military Spending, and Peak Oil Demand
Extreme fiscal spending financed by unconventional measures (such as Modern Monetary Theory) is in vogue and a key proposition for the post-Covid world.
Election years have historically brought positive returns to markets, and since 1944 we only had two election years that were not positive… 2000 (Dot-com Crash) and 2008 (GFC).
Notes and key takeaways from Mervyn King's, The End of Alchemy
Given the recent $20 trillion of stimulus sponsored by governments and Central Banks all over the world to keep the global economy afloat amidst the COVID pandemic, we asked ourselves who and especially how are we going to pay for this spending regime.
The US market is still following the same Fed and Government stimulus narrative of the last months, which end ups benefitting the larger and already dominant companies of the US equity market (#tech).
Many global data points appear to be carving out a V-shaped recovery. This is deeply misleading, merely reflecting the depth of the economic decline, rather than the success of the rebound. Leaders are already preparing to add yet more stimulus.
The most important message coming out of the markets is not the overall severity of the economic crisis, but rather an indicator of the already in place fragile market structure that is being exposed
U.S. government debt has grown to +$26 trillion today and for the first time in history, total debt to GDP will rise above 100% in 2021 (potentially 2020 depending on continued COVID response)
We’ve seen a huge amount of new retail investors joining the financial markets, with the ambition of finding opportunities to “buy the dip”. Whilst they have benefitted from the rebound, we question how much longer can this last.
The future could see both an increase in bankruptcies and an increase in zombie firms.